The following numbers were randomly generated from a standard normal distribution: -0.25 0.3 1.5 -1.2 -1.65 1.5 Suppose a security follows a geometric Brownian motion with volatility parameter, sigma=0.2, and interest rate r=0.01. If the initial closing price is S0=s=50, compute six more simulated daily closing prices. For the daily increment in time we are using 1/252 year.
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
The following numbers were randomly generated from a standard
-0.25 0.3 1.5 -1.2 -1.65 1.5
Suppose a security follows a geometric Brownian motion with volatility parameter, sigma=0.2, and interest rate r=0.01. If the initial closing price is S0=s=50, compute six more simulated daily closing prices. For the daily increment in time we are using 1/252 year.
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